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WTO rule frustrates industry

Ron Smith Farm Press Editorial Staff | May 20, 2004

No surprise that the World Trade Organization's preliminary ruling on U.S. cotton policy was the topic de jour at the opening night reception of the 93rd Annual Texas Cotton Association Convention this week in San Antonio.

The predominant feeling was frustration at a decision observers say is without merit and biased toward competitors who are eager to see the U.S. farm program dismantled. (One of those, Australia, sat on the WTO panel.)

Some suggested that the United States should withdraw from both the World Trade Organization and the United Nations.

“I know that sound isolationist,” one observer remarked, “but we can't continue to allow other countries to dictate how we run our business.”

Steve Verett, executive director of Plains Cotton Growers, said the ruling, if it turns out as initial reports indicate, would be devastating to the cotton industry.

Verett said the WTO so far has failed to live up to its hype. “I may be biased, but I don't think multi-lateral trade negotiations necessarily have our best interests at heart. Some critics may claim I'm protectionist but that's the farthest thing from the truth. I realize the importance of trade to the cotton industry and to agriculture in general, but we've been working with the WTO for 10 or 15 years now, and it's a pipe dream to believe that countries can come together in one big world court, hold hands and sing Cum By Yah.

“Reality indicates that WTO has not been successful. We have not been able to negotiate a deal through the organization.”

Better solution

Verett says a better solution hinges on bilateral trade agreements with “countries we know we can do business with. We work together and spell out arrangements for trade. Critics may ask how can we enforce bilateral agreements. That could be difficult but we don't have an effective means of enforcing WTO agreements either.”

Verett, who raises cotton in the Texas High Plains, said PCG, with the entire cotton industry and other commodity associations, worked closely with the U.S. Congress to craft the Farm Security and Rural Investment Act of 2002. “From day one, we were assured that the bill would be WTO compliant,” he said. “I did not entirely agree with that. I thought the WTO placed unnecessary limits on what we could do, a $19 billion spending limit, for instance.”

Verett said commodity groups and legislators felt the final law complied with WTO restrictions.

“Now, for a three-member panel to determine that the cotton program does not comply with WTO is ludicrous.”

He said the world couldn't point a finger at the United States and claim protectionism. “We import too many goods for that claim to stick,” he said. “But it is not in our best interest to turn our sovereignty over to a world panel that does not have our best interests in mind.”

Verett hopes that the decision, if it turns out to be as negative as most observers believe, will convince Congress to consider other trade opportunities. “But Congress apparently still views WTO as the solution. I disagree. The trends suggest multi-lateral trade negotiations have not been successful.

NAFTA example

“Bilateral trade, on the other hand, has seen some success. NAFTA, for instance, may have a mixed record but it has been good for cotton trade with Mexico.”

Verett also said that to consider Brazil, the country precipitating the WTO action against the United States, as a developing country “is ludicrous.”

“I'm upset,” said Neil Mearns, president of Cotton Trading Enterprises, Inc., Pass Christian, Mississippi. “If we're wrong and the ruling goes against us, then we went into WTO with a program that was out of compliance and we signed on knowing that.”

Mearns said that logic is not plausible and that for a three-member panel to say now that the cotton program is out of compliance is ridiculous. He smells a rat in Brazil.

“I lived in Brazil for years and watched their agricultural industry grow. They continue to expand production area for cotton and they want to export and they want to be competitive.”

He said some expansion comes from Australian farmers taking acreage for cotton production. He wondered at the coincidence that an Australian sits on the three-member panel.

“The United States farmer is behind the eight-ball,” he said. “Old Europe and the rest of the world are all jealous of our military and financial might and when they get a chance to get a little of their own back, they take the opportunity.”

Possible losses

Mearns said if the decision goes against the United States, losses could include the Step 2 program, GSM, which helps finance manufacturing facilities for foreign customers, and the PL 480 program.

“And after cotton, grain crops will go next. They have programs, too.”

Mearns expressed disgust that Brazil has used “one of the foremost law firms in Washington to make its legal case. They also have a professor from Berkley who provided facts and figures, and a former USDA official provided particulars about the program.

“It certainly looks like a stacked deck. I wonder if we are ever going to satisfy WTO. And what is the point?”

Mearns said he's also concerned that no one is rushing to defend U.S. policy. Limiting the U.S. farmer's ability to earn a livelihood, he said, does not bode well for the future of the U.S. economy or for the stability of the rest of the world.

“Agriculture is the backbone of our economy. If farmers can't make a living growing cotton or grain, who will grow it? What happens then to the infrastructure? And without the United States as the backbone of world agricultural production, who will produce enough to meet demand?

“And when disaster strikes, who will feed and clothe needy people? We are always the first to supply aid. It's not Brazil and it's not Mali.”

Hypocritical charges

He's also miffed at the hypocritical charges of unfair subsidies when other countries, including Brazil, find ways to snub WTO regulations. “They devalue their currency to be more competitive in international markets,” he said. “That's a government subsidy but they get away with it. And we can't do that.”

Mearns also suggested that someone should examine the amount of foreign aid the United States supplies annually and balance that against farm program expenses. “That would be an interesting comparison,” he said.

Mearns said his thought and opinions are his own and do not necessarily reflect a position of TCA.

Bob Avant, a Williamson County, Texas, farmer and member of the Texas Food and Fiber Commission, says the decision represents only “the first volley in the battle and certainly is not the end of the war.”

Avant said the Bush administration has indicated it will appeal a negative decision. “I think the judgment will be refined and we'll see all sorts of responses. I expect Congress will explore a lot of factors to put us in a stronger bargaining position.”

Avant also expressed concern with the committee makeup: Australia, Poland and Chile. “There's not much sympathy there for our farm program.”

He's concerned for the future of agricultural legislation. “When this farm law runs out we will not have Congressman Larry Combest and we may not have Congressman Charlie Stenholm around to watch out for the interests of Texas farmers and for agriculture across the country. I think we will maintain some kind of program that includes a safety net for farmers, however. I hope we maintain a program that allows U.S. farmers to remain competitive with farmers in countries who play by different rules and who have no labor or environmental laws to restrict them.”

TCA president Michael Canale, Lubbock, said he's concerned that continued erosion of the American farmer's ability to earn a living will result in more reliance on foreign food supplies.